EXHIBIT 1.1
EXECUTION COPY
20,000,000 Shares
CHESAPEAKE ENERGY CORPORATION
Common Stock
UNDERWRITING AGREEMENT
February 27, 2003
CREDIT SUISSE FIRST BOSTON LLC
MORGAN STANLEY & CO. INCORPORATED
SALOMON SMITH BARNEY INC.,
As Representatives (the "Representatives") of the Several Underwriters
c/o Credit Suisse First Boston LLC
Eleven Madison Avenue
New York, NY 10010-3629
Dear Sirs:
1. Introductory. Chesapeake Energy Corporation, an Oklahoma corporation
(the "Company"), proposes to issue and sell 20,000,000 shares ("Firm
Securities") of its Common Stock ("Securities") and also proposes to issue and
sell to the several underwriters named in Schedule A hereto (the
"Underwriters"), at the option of the Underwriters, an aggregate of not more
than 3,000,000 additional shares ("Optional Securities") of its Securities as
set forth below. The Firm Securities and the Optional Securities are herein
collectively called the "Offered Securities". The Company hereby agrees with the
Underwriters as follows:
2. Representations and Warranties of the Company. The Company represents
and warrants to, and agrees with, the several Underwriters that:
(a) A registration statement (No. 333-96863), including a prospectus,
relating to the Offered Securities has been filed with the Securities and
Exchange Commission (the "Commission") and has become effective. Such
registration statement, as amended at the time of this Agreement, is
hereinafter referred to as the "Registration Statement", and the prospectus
dated August 1, 2002 included in such Registration Statement, as
supplemented to reflect the terms of the offering of the Offered
Securities, as first filed with the Commission pursuant to and in
accordance with Rule 424(b) (" Rule 424(b)") under the Securities Act of
1933 (the "Act"), including all material incorporated by reference therein,
is hereinafter referred to as the "Prospectus". No document has been or
will be prepared or distributed in reliance on Rule 434 under the Act.
(b) On its effective date, the Registration Statement conformed in all
respects to the requirements of the Act and the rules and regulations of
the Commission (the "Rules and Regulations") and did not include any untrue
statement of a material fact or omit to state any material fact required to
be stated therein or necessary to make the statements therein not
misleading, and on the date of this Agreement, the Registration Statement
and the Prospectus will conform in all respects to the requirements of the
Act and the Rules and Regulations, and neither of such
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documents will include any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary to make
the statements therein not misleading, except that the foregoing does not
apply to statements in or omissions from any of such documents based upon
written information furnished to the Company by any Underwriter through the
Representatives, if any, specifically for use therein. The documents
incorporated by reference in the Prospectus (the "Company Filed
Documents"), when they became effective or were filed with the Commission,
as the case may be, conformed in all material respects with the
requirements of the Act or the Securities Exchange Act of 1934 (the
"Exchange Act"), as applicable, and the Rules and Regulations.
(c) The Company has been duly incorporated and is an existing
corporation in good standing under the laws of the State of Oklahoma, with
power and authority (corporate and other) to own its properties and conduct
its business as described in the Prospectus; and the Company is duly
qualified to do business as a foreign corporation in good standing in all
other jurisdictions in which its ownership or lease of property or the
conduct of its business requires such qualification.
(d) Each subsidiary of the Company has been duly organized and is in
good standing under the laws of the jurisdiction of its organization, with
power and authority (corporate and other) to own its properties and conduct
its business as described in the Prospectus; and each subsidiary of the
Company is duly qualified to do business and is in good standing in all
other jurisdictions in which its ownership or lease of property or the
conduct of its business requires such qualification; all of the issued and
outstanding capital stock or similar equity interests of each subsidiary of
the Company has been duly authorized and validly issued and is fully paid
and nonassessable; and the capital stock or similar equity interests of
each subsidiary owned by the Company, directly or through subsidiaries, is
owned free from liens, encumbrances and defects.
(e) The Offered Securities and all other outstanding shares of capital
stock of the Company are, and, when the Offered Securities have been
delivered and paid for in accordance with this Agreement on each Closing
Date (as defined below), such Offered Securities will have been validly
issued, fully paid and nonassessable and will conform to the description
thereof contained in the Prospectus; and the stockholders of the Company
have no preemptive rights with respect to the Securities.
(f) Except as disclosed in the Prospectus, there are no contracts,
agreements or understandings between the Company and any person that would
give rise to a valid claim against the Company or any Underwriter for a
brokerage commission, finder's fee or other like payment in connection with
this offering.
(g) The Offered Securities have been approved for listing on the New
York Stock Exchange, subject to notice of issuance.
(h) No consent, approval, authorization, filing with or order of any
court or governmental agency or body is required for the consummation of
the transactions contemplated by this Agreement in connection with the
issuance and sale of the Offered Securities by the Company, except such as
have been obtained and made under the Act and such as may be required under
state securities laws.
(i) None of the execution, delivery and performance of this Agreement,
the issuance and sale of the Offered Securities and compliance with the
terms and provisions hereof, will result in a breach or violation of any of
the terms and provisions of, or constitute a default under, any statute,
rule, regulation or order of any governmental agency or body or any court,
domestic or foreign, having jurisdiction over the Company or any subsidiary
of the Company or any of their properties, or any agreement or instrument
to which the Company or any such subsidiary is a party or by which the
Company or any such subsidiary is bound or to which any of the properties
of the Company or
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any such subsidiary is subject, or the charter or by-laws (or similar
organizational documents) of the Company or any such subsidiary, and the
Company has full power and authority to authorize, issue and sell the
Offered Securities as contemplated by this Agreement.
(j) This Agreement has been duly authorized, executed and delivered by
the Company.
(k) Except as disclosed in the Prospectus, the Company and its
subsidiaries have good and marketable title to all real properties and all
other properties and assets owned by them, including, without limitation,
all oil and gas producing properties of the Company and its subsidiaries
and all assets and facilities used by the Company and its subsidiaries in
the production and marketing of oil and gas, in each case free from liens,
encumbrances and defects that would materially affect the value thereof or
materially interfere with the use made or to be made thereof by them; and,
except as disclosed in the Company Filed Documents, the Company and its
subsidiaries hold any leased real or personal property, including, without
limitation, all oil and gas producing properties of the Company and its
subsidiaries and all assets and facilities used by the Company and its
subsidiaries in the production and marketing of oil and gas, under valid
and enforceable leases with no exceptions that would materially interfere
with the use made or to be made thereof by them.
(l) The Company and its subsidiaries possess adequate certificates,
authorities or permits issued by appropriate governmental agencies or
bodies necessary to conduct the business now operated by them and have not
received any notice of proceedings relating to the revocation or
modification of any such certificate, authority or permit that, if
determined adversely to the Company or any of its subsidiaries, would
individually or in the aggregate have a material adverse effect on the
condition (financial or other), business, properties or results of
operations of the Company and its subsidiaries taken as a whole ("Material
Adverse Effect").
(m) No labor dispute with the employees of the Company or any
subsidiary exists or, to the knowledge of the Company, is imminent that
might have a Material Adverse Effect.
(n) The Company and its subsidiaries own, possess or can acquire on
reasonable terms, adequate trademarks, trade names and other rights to
inventions, know-how, patents, copyrights, confidential information and
other intellectual property (collectively, "intellectual property rights")
necessary to conduct the business now operated by them, or presently
employed by them, and have not received any notice of infringement of, or
conflict with, asserted rights of others with respect to any intellectual
property rights that, if determined adversely to the Company or any of its
subsidiaries, would individually or in the aggregate have a Material
Adverse Effect.
(o) Except as disclosed in the Prospectus, neither the Company nor any
of its subsidiaries is in violation of any statute, rule, regulation,
decision or order of any governmental agency or body or any court, domestic
or foreign, relating to the use, disposal or release of hazardous or toxic
substances or relating to the protection or restoration of the environment
or human exposure to hazardous or toxic substances (collectively,
"environmental laws"), owns or operates any real property contaminated with
any substance that is subject to any environmental laws, is liable for any
off-site disposal or contamination pursuant to any environmental laws, or
is subject to any claim relating to any environmental laws which violation,
contamination, liability or claim would individually or in the aggregate
have a Material Adverse Effect; and the Company is not aware of any pending
investigation which might lead to such a claim.
(p) Except as disclosed in the Prospectus, there are no pending
actions, suits or proceedings against or affecting the Company, any of its
subsidiaries or any of their respective properties that, if determined
adversely to the Company or any of its subsidiaries, would individually or
in the aggregate have a Material Adverse Effect, or would materially and
adversely affect the ability of the Company to perform its obligations
under this Agreement, or which are otherwise material in the
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context of the sale of the Offered Securities; and no such actions, suits
or proceedings are threatened or, to the Company's knowledge, contemplated.
(q) The financial statements included or incorporated by reference in
the Prospectus present fairly the financial position of the Company and its
consolidated subsidiaries as of the dates shown and their results of
operations and cash flows for the periods shown, and such financial
statements have been prepared in conformity with the generally accepted
accounting principles in the United States applied on a consistent basis.
(r) Except as disclosed in the Prospectus, since the date of the
latest audited financial statements incorporated by reference in the
Prospectus there has been no material adverse change, nor any development
or event involving a prospective material adverse change, in the condition
(financial or other), business, properties or results of operations of the
Company and its subsidiaries taken as a whole, and, except as disclosed in
the Prospectus, there has been no dividend or distribution of any kind
declared, paid or made by the Company on any class of its capital stock.
(s) The Company is not, and after giving effect to the offering and
sale of the Offered Securities and the application of proceeds thereof as
described in the Prospectus, will not be an "investment company" as defined
in the Investment Company Act of 1940.
(t) The Company is subject to the reporting requirements of either
Section 13 or 15(d) of the Exchange Act and files reports with the
Commission on the Electronic Data Gathering, Analysis, and Retrieval
(EDGAR) system.
3. Purchase, Sale and Delivery of Offered Securities. On the basis of the
representations, warranties and agreements herein contained, but subject to the
terms and conditions herein set forth, the Company agrees to sell to the
Underwriters, and the Underwriters agree, severally and not jointly, to purchase
from the Company, at a purchase price of $7.7355 per share, the respective
numbers of shares of Firm Securities set forth opposite the names of the
Underwriters in Schedule A hereto.
The Company will deliver the Firm Securities to the Representatives for the
accounts of the Underwriters, against payment of the purchase price in Federal
(same day) funds by official bank check or checks or wire transfer to an account
at a bank acceptable to the Representatives drawn to the order of the Company at
the office of Cravath, Swaine & Moore, at 10:00 A.M., New York time, on March 5,
2003, or at such other time not later than seven full business days thereafter
as the Representatives and the Company determine, such time being herein
referred to as the "First Closing Date". For purposes of Rule 15c6-1 under the
Exchange Act, the First Closing Date (if later than the otherwise applicable
settlement date) shall be the settlement date for payment of funds and delivery
of securities for all the Offered Securities sold pursuant to the offering. The
certificates for the Firm Securities so to be delivered will be in definitive
form, in such denominations and registered in such names as the Representatives
request and will be made available for checking and packaging at the above
office of Cravath, Swaine & Moore at least 24 hours prior to the First Closing
Date.
In addition, upon written notice from the Representatives given to the
Company from time to time not more than 30 days subsequent to the date of the
Prospectus, the Underwriters may purchase all or less than all of the Optional
Securities at the purchase price per Security to be paid for the Firm
Securities. The Company agrees to sell to the Underwriters the number of shares
of Optional Securities specified in such notice and the Underwriters agree,
severally and not jointly, to purchase such Optional Securities. Such Optional
Securities shall be purchased for the account of each Underwriter in the same
proportion as the number of shares of Firm Securities set forth opposite such
Underwriter's name bears to the total number of shares of Firm Securities
(subject to adjustment by the Representatives to eliminate fractions) and may be
purchased by the Underwriters only for the purpose of covering over-allotments
made in connection with the sale of the Firm Securities. No Optional Securities
shall be sold or delivered unless the Firm Securities
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previously have been, or simultaneously are, sold and delivered. The right to
purchase the Optional Securities or any portion thereof may be exercised from
time to time and to the extent not previously exercised may be surrendered and
terminated at any time upon notice by the Representatives to the Company.
Each time for the delivery of and payment for the Optional Securities,
being herein referred to as an "Optional Closing Date", which may be the First
Closing Date (the First Closing Date and each Optional Closing Date, if any,
being sometimes referred to as a "Closing Date"), shall be determined by the
Representatives but shall be not later than five full business days after
written notice of election to purchase Optional Securities is given. The Company
will deliver the Optional Securities being purchased on each Optional Closing
Date to the Representatives for the accounts of the several Underwriters,
against payment of the purchase price therefor in Federal (same day) funds by
official bank check or checks or wire transfer to an account at a bank
acceptable to the Representatives drawn to the order of the Company, at the
above office of Cravath, Swaine & Moore. The certificates for the Optional
Securities being purchased on each Optional Closing Date will be in definitive
form, in such denominations and registered in such names as the Representatives
request upon reasonable notice prior to such Optional Closing Date and will be
made available for checking and packaging at the above office of Cravath, Swaine
& Moore at a reasonable time in advance of such Optional Closing Date.
4. Offering by Underwriters. It is understood that the several Underwriters
propose to offer the Offered Securities for sale to the public as set forth in
the Prospectus.
5. Certain Agreements of the Company. The Company agrees with the several
Underwriters that:
(a) The Company will file the Prospectus with the Commission pursuant
to and in accordance with Rule 424(b)(5) not later than the second business
day following the execution and delivery of this Agreement.
(b) The Company will advise the Representatives promptly of any
proposal to amend or supplement the Registration Statement or the
Prospectus and will afford the Representatives a reasonable opportunity to
comment on any such proposed amendment or supplement; and the Company will
also advise the Representatives promptly of the filing of any such
amendment or supplement and of the institution by the Commission of any
stop order proceedings in respect of the Registration Statement or of any
part thereof and will use its best efforts to prevent the issuance of any
such stop order and to obtain as soon as possible its lifting, if issued.
(c) If, at any time when a prospectus relating to the Offered
Securities is required to be delivered under the Act in connection with
sales by any Underwriter or dealer, any event occurs as a result of which
the Prospectus as then amended or supplemented would include an untrue
statement of a material fact or omit to state any material fact necessary
to make the statements therein, in the light of the circumstances under
which they were made, not misleading, or if it is necessary at any time to
amend the Prospectus to comply with the Act, the Company promptly will
notify the Representatives of such event and will promptly prepare and file
with the Commission, at its own expense, an amendment or supplement which
will correct such statement or omission or an amendment which will effect
such compliance. Neither the Representatives' consent to, nor the
Underwriters' delivery of, any such amendment or supplement shall
constitute a waiver of any of the conditions set forth in Section 6 hereof.
(d) As soon as practicable, but not later than 16 months, after the
date of this Agreement, the Company will make generally available to its
securityholders an earnings statement covering a period of at least 12
months beginning after the later of (i) the effective date of the
registration statement relating to the Registered Securities, (ii) the
effective date of the most recent post-effective amendment to the
Registration Statement to become effective prior to the date of this
Agreement and
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(iii) the date of the Company's most recent Annual Report on Form 10-K
filed with the Commission prior to the date of this Agreement, which will
satisfy the provisions of Section 11(a) of the Act.
(e) The Company will furnish to the Representatives copies of the
Registration Statement in the form it became effective (including all
exhibits) and of all amendments thereto, any related preliminary
prospectus, any related preliminary prospectus supplement, and, so long as
a prospectus relating to the Offered Securities is required to be delivered
under the Act in connection with sales by any Underwriter or dealer, the
Prospectus and all amendments and supplements to such documents, in each
case in such quantities as the Representatives request. The Prospectus
shall be so furnished on or prior to 3:00 P.M., New York time, on the
business day following the execution and delivery of this Agreement. All
other documents shall be so furnished as soon as available. The Company
will pay the expenses of printing and distributing to the Underwriters all
such documents.
(f) The Company will arrange for the qualification of the Offered
Securities for sale under the laws of such jurisdictions as the
Representatives designate and will continue such qualifications in effect
so long as required for the distribution.
(g) The Company will pay all expenses incident to the performance of
its obligations under this Agreement, for any filing fees and other
expenses (including fees and disbursements of counsel) incurred in
connection with qualification of the Offered Securities for sale under the
laws of such jurisdictions as the Representatives designate and the
printing of memoranda relating thereto, and for expenses incurred in
distributing preliminary prospectuses, preliminary prospectus supplements
and the Prospectus (including any amendments and supplements thereto) to
the Underwriters.
(h) For a period of 90 days after the date of this Agreement, the
Company will not offer, sell, contract to sell, pledge or otherwise dispose
of, directly or indirectly, or file with the Commission a registration
statement under the Act relating to, any additional shares of its
Securities or securities convertible into or exchangeable or exercisable
for any shares of its Securities, or publicly disclose the intention to
make any such offer, sale, pledge, disposition or filing, without the prior
written consent of the Representatives except (i) grants of employee stock
options pursuant to the terms of a plan in effect on the date hereof (ii)
issuances of Common Stock pursuant to the exercise of options, preferred
stock or warrants outstanding on the date of the initial offering of the
Offered Securities and (iii) the issuance of 6% Cumulative Convertible
Preferred Stock on March 5, 2003 (including issuances of Common Stock upon
conversion thereof).
6. Conditions of the Obligations of the Underwriters. The obligations of
the several Underwriters to purchase and pay for the Firm Securities on the
First Closing Date and the Optional Securities to be purchased on each Optional
Closing Date will be subject to the accuracy of the representations and
warranties on the part of the Company herein, to the accuracy of the statements
of officers of the Company made pursuant to the provisions hereof, to the
performance by the Company of its obligations hereunder and to the following
additional conditions precedent:
(a) The Representatives shall have received a letter (the "Initial
Comfort Letter"), dated prior to the date of this Agreement, of
PricewaterhouseCoopers LLP in form and substance satisfactory to the
Representatives.
(b) The Prospectus shall have been filed with the Commission in
accordance with the Rules and Regulations and Section 5(a) of this
Agreement. No stop order suspending the effectiveness of the Registration
Statement or of any part thereof shall have been issued and no proceedings
for that purpose shall have been instituted or, to the knowledge of the
Company or any Underwriter, shall be contemplated by the Commission.
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(c) Subsequent to the execution and delivery of this Agreement, there
shall not have occurred (i) any change, or any development or event
involving a prospective change, in the condition (financial or other),
business, properties or results of operations of the Company and its
subsidiaries taken as one enterprise which, in the judgment of the
Representatives, is material and adverse and makes it impractical or
inadvisable to proceed with completion of the public offering or the sale
of and payment for the Offered Securities; (ii) any downgrading in the
rating of any debt securities of the Company by any "nationally recognized
statistical rating organization" (as defined for purposes of Rule 436(g)
under the Act), or any public announcement that any such organization has
under surveillance or review its rating of any debt securities of the
Company (other than an announcement with positive implications of a
possible upgrading, and no implication of a possible downgrading, of such
rating) or any announcement that the Company has been placed on negative
outlook; (iii) any change in U.S. or international financial, political or
economic conditions or currency exchange rates or exchange controls as
would, in the judgment of a majority in interest of the Underwriters
including the Representatives, be likely to prejudice materially the
success of the proposed issue, sale or distribution of the Offered
Securities, whether in the primary market or in respect of dealings in the
secondary market; (iv) any material suspension or material limitation of
trading in securities generally on the New York Stock Exchange, or any
setting of minimum prices for trading on such exchange, or any suspension
of trading of any securities of the Company on any exchange or in the
over-the-counter market; (v) any banking moratorium declared by U.S.
Federal or New York authorities; (vi) any major disruption of settlements
of securities; or (vii) any attack on, outbreak or escalation of
hostilities or acts of terrorism involving the United States, any
declaration of war by Congress or any other national or international
calamity or emergency if, in the judgment of the Representatives, the
effect of any such attack, outbreak, escalation, act, declaration, calamity
or emergency makes it impractical or inadvisable to proceed with completion
of the public offering or the sale of and payment for the Offered
Securities.
(d) The Representatives, shall have received an opinion, dated such
Closing Date, of Vinson & Elkins L.L.P., counsel for the Company, that:
(i) The Company has been duly incorporated and is an existing
corporation in good standing under the laws of the State of Oklahoma,
with corporate power and authority to own its properties and conduct
its business as described in the Prospectus.
(ii) Each subsidiary of the Company has been duly organized and
is in good standing under the laws of the jurisdiction of its
organization, with power and authority (corporate and other) to own
its property and conduct its business as described in the Prospectus;
and the capital stock or similar equity interests of each subsidiary
owned by the Company, directly or through subsidiaries, is owned free
from liens, encumbrances and defects.
(iii) The Offered Securities delivered on such Closing Date have
been duly authorized and validly issued, are fully paid and
nonassessable and conform to the description thereof contained in the
Prospectus; and the stockholders of the Company have no preemptive
rights with respect to the Offered Securities.
(iv) No consent, approval, authorization or order of, or filing
with, any governmental agency or body or any court is required for the
consummation of the transactions contemplated by this Agreement in
connection with the issuance or sale of the Offered Securities by the
Company, except such as have been obtained and made under the Act and
such as may be required under state securities laws.
(v) None of the execution, delivery and performance of this
Agreement, the issuance and sale of the Offered Securities and
compliance with the terms and provisions
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hereof will result in a breach or violation of any of the terms and
provisions of, or constitute a default under, any statute, rule,
regulation or order of any governmental agency or body or any court
having jurisdiction over the Company or any subsidiary of the Company
or any of their properties, or any agreement or instrument filed or
referenced as an exhibit to the Company's annual report on Form 10-K
for the year ended December 31, 2002 (the "Form 10-K") to which the
Company or any such subsidiary is party or by which the Company or any
such subsidiary is bound or to which any of the properties of the
Company or any such subsidiary is subject, or the charter or by-laws
(or similar organizational documents) of the Company or any such
subsidiary, and the Company has full power and authority to authorize,
issue and sell the Offered Securities as contemplated by this
Agreement.
(vi) Except as disclosed in the Prospectus, there are no pending
actions, suits or proceedings against or affecting the Company, any of
its subsidiaries or any of their respective properties that, if
determined adversely to the Company or any of its subsidiaries, would
individually or in the aggregate have a Material Adverse Effect, or
would materially and adversely affect the ability of the Company to
perform its obligations under this Agreement, or which are otherwise
material in the context of the sale of the Offered Securities; and no
such actions, suits or proceedings are threatened or, to such
counsel's knowledge, contemplated.
(vii) This Agreement has been duly authorized, executed and
delivered by the Company.
(viii) The Registration Statement has become effective under the
Act, the Prospectus was filed with the Commission pursuant to the
subparagraph of Rule 424(b) specified in such opinion on the date
specified therein, and, to the best of the knowledge of such counsel,
no stop order suspending the effectiveness of the Registration
Statement or any part thereof has been issued and no proceedings for
that purpose have been instituted or are pending or contemplated under
the Act, and the Registration Statement, as of its effective date and
as of the date of this Agreement, and the Prospectus, as of the date
of this Agreement, and any amendment or supplement thereto, as of its
date, complied as to form in all material respects with the
requirements of the Act and the Rules and Regulations; each of the
documents incorporated by reference in the Prospectus, at the time it
became effective or was filed with the Commission, as the case may be,
complied as to form in all material respects with the requirements of
the Act or Exchange Act, as the case may be, and the Rules and
Regulations; the descriptions in the Registration Statement and
Prospectus of statutes, legal and governmental proceedings and
contracts and other documents are accurate and fairly present the
information required to be shown; and such counsel do not know of any
legal or governmental proceedings required to be described in the
Prospectus which are not described as required or of any contracts or
documents of a character required to be described in the Registration
Statement or Prospectus or to be filed as exhibits to the Registration
Statement which are not described and filed as required.
It is understood and agreed that certain of the opinions set forth in
paragraphs (i), (ii), (iii), (v) (with respect to conflicts with charters,
by-laws or similar organizational documents and with respect ot certain of the
documents filed as exhibits to the Form 10-K) and (vii) (with respect to due
authorization) may be given by the Commercial Law Group, P.C., and certain
opinions in paragraphs (vi) and (viii) may be given by Henry Hood, Esq.
In addition, Vinson & Elkins L.L.P. shall state that they have participated
in conferences with officers and other representatives of the Company,
representatives of the independent public accountants of the Company, general
counsel of the Company, representatives of the Underwriters and counsel for the
Underwriters, at which conferences the Registration Statement and the Prospectus
were discussed. Such counsel shall further state that, although they have made
certain additional inquiries and investigations in
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connection with the preparation of the Registration Statement and the
Prospectus, they have not verified, are not passing on and do not assume any
responsibility for the accuracy, completeness or fairness of the statements
contained in the Registration Statement or the Prospectus or any documents
incorporated by reference therein, based on the participation described above in
the course of acting as counsel to the Company in this transaction, no
information has come to their attention that has caused such counsel to believe
that the Registration Statement or the Prospectus, at the date hereof and as of
the Closing Date (other than the financial statements and schedules and other
financial data and the oil and gas reserve data, in each case contained or
incorporated by reference (including the notes thereto and auditor's report
thereon) therein, as to which such counsel need not express any comment or
belief) contained an untrue statement of a material fact or omitted to state a
material fact required to be stated therein or necessary to make the statements
therein not misleading.
(e) The Representatives shall have received from Cravath, Swaine &
Moore, counsel for the Purchaser, such opinion or opinions, dated such
Closing Date, with respect to the incorporation of the Company, the
validity of the Offered Securities delivered on such Closing Date, the
Registration Statement, the Prospectus and other related matters as the
Representatives may require, and the Company shall have furnished to such
counsel such documents as they request for the purpose of enabling them to
pass upon such matters. In rendering such opinion, Cravath, Swaine & Moore
may rely as to the incorporation of the Company and all other matters
governed by Oklahoma law upon the opinion of Commercial Law Group, P.C.
referred to above.
(f) The Representatives shall have received a certificate, dated such
Closing Date, of the President or any Vice President and a principal
financial or accounting officer of the Company in which such officers, to
the best of their knowledge after reasonable investigation, shall state
that the representations and warranties of the Company in this Agreement
are true and correct, that the Company has complied with all agreements and
satisfied all conditions on its part to be performed or satisfied hereunder
at or prior to such Closing Date, that no stop order suspending the
effectiveness of the Registration Statement or of any part thereof has been
issued and no proceedings for that purpose have been instituted or are
contemplated by the Commission and that, subsequent to the date of the most
recent financial statements in the Prospectus, there has been no material
adverse change, nor any development or event involving a prospective
material adverse change, in the condition (financial or other), business,
properties or results of operations of the Company and its subsidiaries
taken as a whole except as set forth in or contemplated by the Prospectus
or as described in such certificate.
(g) The Representatives shall have received a letter (the "Bring-Down
Comfort Letter"), dated such Closing Date, of PricewaterhouseCoopers LLP
(i) confirming that they are independent public accountants with respect to
the Company and its subsidiaries within the meaning of the Act and the
applicable Rules and Regulations thereunder, (ii) stating, as of the date
of the Bring-Down Comfort Letter (or, with respect to matters involving
changes or developments since the respective dates as of which specified
financial information is given in the Registration Statement, as of a date
not more than three business days prior to the date of the Bring-Down
Comfort Letter), that the conclusions and findings of such accountants with
respect to the financial information and other matters covered by the
Initial Comfort Letter are accurate, (iii) confirming in all material
respects the conclusions and findings set forth in the Initial Comfort
Letter and (iv) otherwise in form and substance satisfactory in all
respects to the Representatives.
(h) The Representatives shall have received (i) a copy of the
certificate or articles of incorporation, including all amendments thereto,
of the Company, certified as of a recent date by the Secretary of State of
the State of Oklahoma, (ii) a certificate of good standing for the Company,
dated as of a recent date, from such Secretary of State and (iii) a
certificate, dated as of a recent date, of the Secretary of State of each
state in which the Company is qualified to do business as a foreign
corporation under the laws of such state.
10
(i) The Representatives shall have received (i) a copy of the
certificate or articles of incorporation (or similar organizational
document), including all amendments thereto, of each of the Company's
subsidiaries, certified as of a recent date by the Secretary of State of
the state in which such subsidiary is organized, (ii) a certificate of good
standing for each of the Company's subsidiaries, certified as of a recent
date by the Secretary of State of the state in which such subsidiary is
organized, and (iii) a certificate, dated as of a recent date, of the
Secretary of State of each state in which each such subsidiary is qualified
to do business as a foreign corporation (or similar entity) under the laws
of each such state.
(j) On or prior to the date of this Agreement, the Representatives
shall have received lockup letters from each of the executive officers and
directors of the Company, with the exception of Breen Kerr who shall have
delivered to the Representatives an executed lockup letter no later that
the Closing Date.
The Company will furnish the Representatives with such conformed copies of
such opinions, certificates, letters and documents as the Representatives
reasonably request. The Representatives may in their sole discretion waive on
behalf of the Underwriters compliance with any conditions to the obligations of
the Underwriters hereunder, whether in respect of an Optional Closing Date or
otherwise.
7. Indemnification and Contribution. (a) The Company will indemnify and
hold harmless each Underwriter, its partners, directors and officers and each
person, if any, who controls such Underwriter within the meaning of Section 15
of the Act, against any losses, claims, damages or liabilities, joint or
several, to which such Underwriter may become subject, under the Act or the
Exchange Act or otherwise, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based upon any
breach of any of the representations and warranties of the Company contained
herein or any untrue statement or alleged untrue statement of any material fact
contained in the Registration Statement, the Prospectus, or any amendment or
supplement thereto, or any related preliminary prospectus or preliminary
prospectus supplement, or arise out of or are based upon the omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, and will reimburse each
Underwriter for any legal or other expenses reasonably incurred by such
Underwriter in connection with investigating or defending any such loss, claim,
damage, liability or action as such expenses are incurred; provided, however,
that the Company will not be liable in any such case to the extent that any such
loss, claim, damage or liability arises out of or is based upon an untrue
statement or alleged untrue statement in or omission or alleged omission from
any of such documents in reliance upon and in conformity with written
information furnished to the Company by any Underwriter through the
Representatives specifically for use therein, it being understood and agreed
that the only such information furnished by any Underwriter consists of the
information described as such in subsection (b) below; and provided, further,
that with respect to any untrue statement or alleged untrue statement in or
omission or alleged omission from any preliminary prospectus, the indemnity
contained in this subsection (a) shall not inure to the benefit of any
Underwriter from whom the person asserting any such losses, claims, damages or
liabilities purchased the Offered Securities concerned, to the extent that a
prospectus relating to such Offered Securities was required to be delivered by
such Underwriter under th e Act in connection with such purchase and any such
loss, claim, damage or liability of such Underwriter results from the fact that
there was not sent or given to such person, at or prior to the written
confirmation of the sale of such Offered Securities to such person, a copy of
the Prospectus (exclusive of material incorporated by reference) if the Company
had previously furnished copies thereof to such Underwriter.
(b) Each Underwriter will severally and not jointly indemnify and hold
harmless the Company, its directors and officers and each person, if any, who
controls the Company within the meaning of Section 15 of the Act, against any
losses, claims, damages or liabilities to which the Company may become subject,
under the Act or the Exchange Act or otherwise, insofar as such losses, claims,
damages or liabilities (or actions in respect thereof) arise out of or are based
upon any untrue statement or alleged untrue statement of any material fact
contained in the Registration Statement, the Prospectus, or any amendment or
supplement thereto, or any
11
related preliminary prospectus or preliminary prospectus supplement, or arise
out of or are based upon the omission or the alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading, in each case to the extent, but only to the extent, that
such untrue statement or alleged untrue statement or omission or alleged
omission was made in reliance upon and in conformity with written information
furnished to the Company by such Underwriter through the Representatives
specifically for use therein, and will reimburse any legal or other expenses
reasonably incurred by the Company in connection with investigating or defending
any such loss, claim, damage, liability or action as such expenses are incurred,
it being understood and agreed that the only such information furnished by any
Underwriter consists of the following information in the Prospectus furnished on
behalf of each Underwriter: (i) the concession and reallowance figures appearing
in the fourth paragraph under the caption "Underwriting" and (ii) paragraphs 11
and 12 under the caption "Underwriting".
(c) Promptly after receipt by an indemnified party under this Section of
notice of the commencement of any action, such indemnified party will, if a
claim in respect thereof is to be made against the indemnifying party under
subsection (a) or (b) above, notify the indemnifying party in writing of the
commencement thereof; but the failure to notify the indemnifying party will not
relieve it from any liability which it may have under subsection (a) or (b)
above except to the extent that it has been materially prejudiced (through the
forfeiture of substantive rights or defenses) by such failure; and provided
further that the failure to notify the indemnifying party shall not relieve it
from any liability that it may have to any indemnified party otherwise than
under subsection (a) or (b) above. In case any such action is brought against
any indemnified party and it notifies the indemnifying party of the commencement
thereof, the indemnifying party will be entitled to participate therein and, to
the extent that it may wish, jointly with any other indemnifying party similarly
notified, to assume the defense thereof, with counsel satisfactory to such
indemnified party (who shall not, except with the consent of the indemnified
party, be counsel to the indemnifying party), and after notice from the
indemnifying party to such indemnified party of its election so to assume the
defense thereof, the indemnifying party will not be liable to such indemnified
party under this Section for any legal or other expenses subsequently incurred
by such indemnified party in connection with the defense thereof other than
reasonable costs of investigation. No indemnifying party shall, without the
prior written consent of the indemnified party, effect any settlement of any
pending or threatened action in respect of which any indemnified party is or
could have been a party and indemnity could have been sought hereunder by such
indemnified party unless such settlement includes an unconditional release of
such indemnified party from all liability on any claims that are the subject
matter of such action and does not include a statement as to or an admission of
fault, culpability or failure to act by or on behalf of any indemnified party.
(d) If the indemnification provided for in this Section is unavailable or
insufficient to hold harmless an indemnified party under subsection (a) or (b)
above, then each indemnifying party shall contribute to the amount paid or
payable by such indemnified party as a result of the losses, claims, damages or
liabilities referred to in subsection (a) or (b) above (i) in such proportion as
is appropriate to reflect the relative benefits received by the Company on the
one hand and the Underwriters on the other from the offering of the Offered
Securities or (ii) if the allocation provided by clause (i) above is not
permitted by applicable law, in such proportion as is appropriate to reflect not
only the relative benefits referred to in clause (i) above but also the relative
fault of the Company on the one hand and the Underwriters on the other in
connection with the statements or omissions which resulted in such losses,
claims, damages or liabilities as well as any other relevant equitable
considerations. The relative benefits received by the Company on the one hand
and the Underwriters on the other shall be deemed to be in the same proportion
as the total net proceeds from the offering (before deducting expenses) received
by the Company bear to the total underwriting discounts and commissions received
by the Underwriters from the Company under this Agreement. The relative fault
shall be determined by reference to, among other things, whether the untrue or
alleged untrue statement of a material fact or the omission or alleged omission
to state a material fact relates to information supplied by the Company or the
Underwriters and the parties' relative intent, knowledge, access to information
and opportunity to correct or prevent such untrue statement or omission. The
amount paid by an indemnified party as a result of the losses, claims, damages
or liabilities referred to in the first sentence of this subsection (d) shall be
deemed to include any legal or other expenses reasonably incurred by such
indemnified party in
12
connection with investigating or defending any action or claim which is the
subject of this subsection (d). Notwithstanding the provisions of this
subsection (d), no Underwriter shall be required to contribute any amount in
excess of the amount by which the total price at which the Offered Securities
underwritten by it and distributed to the public were offered to the public
exceeds the amount of any damages which such Underwriter has otherwise been
required to pay by reason of such untrue or alleged untrue statement or omission
or alleged omission. No person guilty of fraudulent misrepresentation (within
the meaning of Section 11(f) of the Act) shall be entitled to contribution from
any person who was not guilty of such fraudulent misrepresentation. The
Underwriters' obligations in this subsection (d) to contribute are several in
proportion to their respective underwriting obligations and not joint.
(e) The obligations of the Company under this Section shall be in addition
to any liability which the Company may otherwise have and shall extend, upon the
same terms and conditions, to each person, if any, who controls any Underwriter
within the meaning of the Act; and the obligations of the Underwriters under
this Section shall be in addition to any liability which the respective
Underwriters may otherwise have and shall extend, upon the same terms and
conditions, to each director of the Company, to each officer of the Company who
has signed the Registration Statement and to each person, if any, who controls
the Company within the meaning of the Act.
8. Default of Underwriters. If any Underwriter or Underwriters default in
their obligations to purchase Offered Securities hereunder on either the First
or any Optional Closing Date and the aggregate number of shares of Offered
Securities that such defaulting Underwriter or Underwriters agreed but failed to
purchase does not exceed 10% of the total number of shares of Offered Securities
that the Underwriters are obligated to purchase on such Closing Date, the
Representatives may make arrangements satisfactory to the Company for the
purchase of such Offered Securities by other persons, including any of the
Underwriters, but if no such arrangements are made by such Closing Date, the
non-defaulting Underwriters shall be obligated severally, in proportion to their
respective commitments hereunder, to purchase the Offered Securities that such
defaulting Underwriters agreed but failed to purchase on such Closing Date. If
any Underwriter or Underwriters so default and the aggregate number of shares of
Offered Securities with respect to which such default or defaults occur exceeds
10% of the total number of shares of Offered Securities that the Underwriters
are obligated to purchase on such Closing Date and arrangements satisfactory to
the Representatives and the Company for the purchase of such Offered Securities
by other persons are not made within 36 hours after such default, this Agreement
will terminate without liability on the part of any non-defaulting Underwriter
or the Company, except as provided in Section 9 (provided that if such default
occurs with respect to Optional Securities after the First Closing Date, this
Agreement will not terminate as to the Firm Securities or any Optional
Securities purchased prior to such termination). As used in this Agreement, the
term "Underwriter" includes any person substituted for an Underwriter under this
Section. Nothing herein will relieve a defaulting Underwriter from liability for
its default.
9. Survival of Certain Representations and Obligations. The respective
indemnities, agreements, representations, warranties and other statements of the
Company or its officers and of the several Underwriters set forth in or made
pursuant to this Agreement will remain in full force and effect, regardless of
any investigation, or statement as to the results thereof, made by or on behalf
of any Underwriter, the Company or any of their respective representatives,
officers or directors or any controlling person, and will survive delivery of
and payment for the Offered Securities. If this Agreement is terminated pursuant
to Section 8 or if for any reason the purchase of the Offered Securities by the
Underwriters is not consummated, the Company shall remain responsible for the
expenses to be paid or reimbursed by it pursuant to Section 5 and the respective
obligations of the Company and the Underwriters pursuant to Section 7 shall
remain in effect, and if any Offered Securities have been purchased hereunder
the representations and warranties in Section 2 and all obligations under
Section 5 shall also remain in effect. If the purchase of the Offered Securities
by the Underwriters is not consummated for any reason other than solely because
of the termination of this Agreement pursuant to Section 8 or the occurrence of
any event specified in clause (iii), (iv), (v), (vi) or (vii) of Section 6(c),
the Company will reimburse the Underwriters for all out-of-pocket expenses
(including fees
13
and disbursements of counsel) reasonably incurred by them in connection with the
offering of the Offered Securities.
10. Notices. All communications hereunder will be in writing and, if sent
to the Underwriters, will be mailed, delivered or telegraphed and confirmed to
the Representatives, c/o Credit Suisse First Boston LLC, Eleven Madison Avenue,
New York, NY 10010-3629, Attention: Transactions Advisory Group; Morgan Stanley
& Co. Incorporated, 1585 Broadway, New York, NY 10036; and Salomon Smith Barney
Inc., 338 Greenwich, New York, NY 10013 or, if sent to the Company, will be
mailed, delivered or telegraphed and confirmed to it at Chesapeake Energy
Corporation, 6100 North Western Avenue, Oklahoma City, Oklahoma 73118,
Attention: Marcus C. Rowland, Executive Vice President and Chief Financial
Officer; provided, however, that any notice to an Underwriter pursuant to
Section 7 will be mailed, delivered or telegraphed and confirmed to such
Underwriter.
11. Successors. This Agreement will inure to the benefit of and be binding
upon the parties hereto and their respective successors and the officers and
directors and controlling persons referred to in Section 7, and no other person
will have any right or obligation hereunder.
12. Representation of Underwriters. The Representatives will act for the
several Underwriters in connection with this financing, and any action under
this Agreement taken by the Representatives jointly will be binding upon all the
Underwriters.
13. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original, but all such
counterparts shall together constitute one and the same Agreement.
14. Applicable Law. This Agreement shall be governed by, and construed in
accordance with, the laws of the State of New York without regard to principles
of conflicts of laws.
The Company hereby submits to the non-exclusive jurisdiction of the Federal
and state courts in the Borough of Manhattan in The City of New York in any suit
or proceeding arising out of or relating to this Agreement or the transactions
contemplated hereby.
14
If the foregoing is in accordance with the Representatives' understanding
of our agreement, kindly sign and return to us one of the counterparts hereof,
whereupon it will become a binding agreement between the Company and several
Underwriters in accordance with its terms.
Very truly yours,
CHESAPEAKE ENERGY CORPORATION
By: /s/ Michael A. Johnson
--------------------------------
Name: Michael A. Johnson
Title: Controller and Senior Vice
President--Accounting
The foregoing Underwriting Agreement
is hereby confirmed and accepted as
of the date first above written.
CREDIT SUISSE FIRST BOSTON LLC
MORGAN STANLEY & CO. INCORPORATED
SALOMON SMITH BARNEY INC.
Acting on behalf of themselves
and as the Representatives of
the several Underwriters.
By: CREDIT SUISSE FIRST BOSTON LLC
By: /s/ Timothy Perry
-----------------------------------
Name: Timothy Perry
Title: Director
15
SCHEDULE A
Number of
Underwriter Firm Securities
- ----------- ----------------
Credit Suisse First Boston LLC 7,000,000
Morgan Stanley & Co. Incorporated 3,500,000
Salomon Smith Barney Inc. 3,500,000
Bear, Stearns & Co. Inc. 2,500,000
Lehman Brothers Inc. 2,500,000
CIBC World Markets Corp. 250,000
Johnson Rice & Company L.L.C 250,000
RBC Dain Rauscher Inc. 250,000
Simmons & Company International 250,000
----------
Total 20,000,000
==========